Madhur Shares & Stock Ltd.,, Ahmedabad v. The ACIT., Ahmedabad Circle-3,, Ahmedabad

ITA 3180 & CO 338-04 1 IN THE INCOME_TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE SHRI T.K. SHARMA AND SHRI D.C. AGRAWAL. ITA. NO.3180 /AHD/2004 (BY DEPARTMENT) AND C.O. NO. 338/AHD/2004. (BY ASSESSEE) (ASSESSMENT YEAR: 2000-01) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-3 5 TH FLOOR INSURANCE BLDG. ASHRAM ROAD AHMEDABAD. VS M/S. MADHUR SHARES & STOCKS LTD. MADHUR COMPLEX STADIUM CIRCLE NAVRANGPURA AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AABCM 5449 D REVENUE BY : SHRI B.S. GAHLOT CIT(DR) ASSESSEE BY : SHRI. S.N.SOPARKAR SR.ADVOCAT E ( (( ( )/ )/)/ )/ ORDER PER: SHRI D.C. AGRAWAL THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. C.I.T.(A) DATED 5-8-2004. THE ASSESSEE HAS RAISED CROSS OBJE CTIONS. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER :- 1. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN NOT H OLDING THAT THE ASSESSEE IS NOT DUTY BOUND TO ESTABLISH THE IDENTITY OF CREDITORS THEIR CREDITWORTHINESS AND GENUINENESS OF THE DEPOSITS U/S. 68 OF THE I.T.ACT. ITA 3180 & CO 338-04 2 2. THE C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.1 35 55 972/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S. 68 OF THE I. T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND L AW THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSE SSING OFFICER. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND O R ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. WHEREAS THE ASSESSEE HAS RAISED CROSS OBJECTIONS AS UNDER : - 1. THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN N OT GIVING SPECIFIC DECISION ON THE FACTS ON THE APPLICATION OF SEC. 2(22)(E) OF THE I.T. ACT. 2. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. .C.I.T.(A) /ASSESSING OFFICER BE CANCELLED TO THE ABOVE EXTENT. 3. 3. DURING THE COURSE OF HEARING LD. A.R. FOR THE ASSESSE E DID NOT PRESS CROSS OBJECTION. THEREFORE THEY ARE DISMISSED AS NOT PRESSED. 4. IN REVENUES APPEAL THE FACTS ARE THAT ASSESSEE IS A CL OSELY HELD COMPANY A SHARE BROKER AND MEMBER OF AHMEDABAD STOCK EXCHANGE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NOTED THAT ASSESSEE HAS NOT FURNISHED CONFIRMATIONS IN RESPECT OF THE FOLLOW ING BALANCES OUTSTANDING AT THE END OF THE YEAR. ITA 3180 & CO 338-04 3 NAME OF ACCOUNT. CREDIT AMOUNT. NATURE OF TRANSACTI ON. ARVIND POTTERIES 1 59 990 SHARE TRADING. B.D. VAKIL & CO. 1 33 699 SHARE TRADING DEEPIKA A. PATEL. 1 66 723 SHARE TRADING KUNAL A. PATEL. 2 32 540.20 SHARE TRADING MARGIN 1 15 11 714 SHARE TRADING MONISH MUNSHWAN 1 60 800 SHARE TRADING UCHEM IMPEX PVT.LTD. 1 68 982.41 SHARE TRADIN G LESS THAN RS.1 00 000/- 5 41 614.88 S HARE TRADING OTHER CREDITORS BELOW RS..1 00 000/- 2 79 908.16 PURCHASE PAYMENT. TOTAL. 1 33 55 972..35 5. SINCE THE CONFIRMATIONS WERE NOT FURNISHED THE A.O. MADE THE ADDITION OF RS.1 33 55 972/- U/S. 68 OF THE I. T. ACT. 6. THE LD. C.I.T.(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND NOTED THAT THE BALANCES ARE OUT OF RUNNING CURRENT ACCOUNTS OF VARIOUS CLIENTS WHO WERE SAID TO HAVE PURCHASED SHARES THRO UGH THE ASSESSEE AND THEREFORE HAD PAID MARGIN MONEY A PART OF WHICH WAS OUTSTANDING AS BALANCE AT THE END OF THE ACCOUNTING PER IOD. THE ACCOUNTS WERE FINALLY SETTLED IN THE NEXT FINANCIAL YEA R. THE LD. C.I.T.(A) ACCORDINGLY DELETED THE ADDITION BY OBSERVIN G AS UNDER :- THERE IS NO DISPUTE REGARDING THE FACT THAT THE AMOUN T OF RS.1 15 11 714/- WAS THE SUM TOTAL OF MARGIN MONEY DEB ITED TO THE ACCOUNTS OF THE CLIENTS AND CREDITED TO THE MARGIN MO NEY ACCOUNT. THE PROCESS OF CHARGING MARGIN MONEY FROM CLIENTS AND REVERSING THE ENTRIES AT THE BEGINNING OF NEW SETTLEME NT IS AN ONGOING PROCESS AND IT IS NOT A FACT THAT THE AMOUNTS IN QUESTION ARE CREDITED IN THE BOOKS OF THE APPELLANT ON A PARTI CULAR DATE AND THE SOURCE OF WHICH IS NOT FOUND EXPLAINED. THE VER Y BASIS FOR APPLICATION OF PROVISIONS OF SEC.68 IS THE CREDIT ENTR IES IN THE ACCOUNT BOOKS. IN THE PRESENT CASE THE A.O. HAS NOT BEEN ABLE TO STATE AS TO THE SOURCE OF WHICH CREDIT ENTRIES WAS NOT EXPLAINED SATISFACTORILY ACCORDING TO HIM. SECONDLY THE MARGIN MONEY IS DIRECTLY RELATABLE TO NET PURCHASES OF SHARES BY A CLIENT AND THE AMOUNT IS ALWAYS LOWER THAN THE TOTAL VALUE O F PURCHASES OF EQUITY. THE CREDIT ENTRY OF MARGIN MONEY IS THERE FORE IS ITA 3180 & CO 338-04 4 AGAINST THE GROSS LIABILITY IN THE ACCOUNT OF THE CLIEN TS WHO HAVE TO PAY MONEY TO THE SHARE BROKER. THE NET AMOUNT IS A CTUALLY RECEIVABLE BY THE SHARE BROKER FROM HIS CLIENTS IN ORDI NARY COURSE OF SHARE TRADING BUSINESS. THIS IS APPARENTLY THE REASON WHY THE AMOUNT OF SUNDRY DEBTORS IS RS.337.67 LACS AND THE SUNDRY CREDITORS IS RS.144.84 LACS. THUS THE BASIC INGREDIENT OF SECTION 68 IS NOT PRESENT IN THE TRANSACTION OF MARGIN MONEY. IT IS FURTHER SEEN THAT THE A.O. HAS ADDED OTHER AMOUNTS OF CREDITORS ALSO FOR WHICH HE HAS NOT CALLED FOR PARTICULARS. THE ARG UMENT THAT THE CASE LAWS RELIED UPON BY THE A.O. HAS NO RELEV ANCE ON THE ISSUE IS FOUND TO HAVE CONSIDERABLE FORCE. ON CAREF UL CONSIDERATION OF THE ENTIRE FACTS AND CIRCUMSTANCES AND SUBMISSIONS OF THE APPELLANT IT IS FOUND THAT THE ADDIT ION OF RS.1 33 55 972/- IS NOT SUSTAINABLE AND IS DIRECTED TO BE DELETED ACCORDINGLY. 7. BEFORE US THE LD. D.R. SUBMITTED THAT ASSESSEE DID NOT FURNISH CONFIRMATIONS. THEREFORE A.O. WAS UNABLE TO VERIFY WH ETHER THE PURCHASES ARE GENUINE OR NOT. ON THE OTHER HAND LD. A .R. SUBMITTED THAT THESE DETAILS WERE SUBMITTED TO THE A.O. THEY WE RE ALSO SUBMITTED BEFORE THE LD. C.I.T.(A) WHO HAD VERIFIED THE ACCOUNTS AND FOUND THAT THEY ARE PART OF RUNNING ACCOUNT AND THERE FORE THEY ARE VERIFIABLE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT ALLEGED CONFIRMATION FROM TH E PARTIES WHOSE BALANCES WERE OUTSTANDING AT THE END OF THE ACCOUNTING P ERIOD WAS SUBMITTED AT THE FAG END OF THE ACCOUNTING PERIOD MAKI NG IT IMPOSSIBLE FOR THE A.O. TO CARRY ON INQUIRIES. THERE IS ALSO NOTH ING ON RECORD TO SUGGEST THAT LD. C.I.T.(A) HAS CARRIED OUT ANY VERIFICAT ION OF THE ALLEGED BALANCES OF THE PARTIES. ONCE THE A.O. QUESTIONS THE ASSESSEE THEN IT IS A DUTY OF THE ASSESSEE TO ATLEAST PRIMA-FACIE PROVE THE IDENTITY CREDIT-WORTHINESS AND GENUINENESS OF THE TRANSACTION. ATL EAST IT WAS EXPECTED FROM THE ASSESSEE TO GIVE COMPLETE ADDRESS OF THE PARTIES BEFORE REASONABLE TIME OF COMPLETION OF ASSESSMENT SO AS TO ENABLE ITA 3180 & CO 338-04 5 THE A.O. TO CARRY OUT VERIFICATION. WE ARE OF THE VIE W THAT THE ARGUMENT OF THE LD. D.R. IS WELL FOUNDED AND ITS CRITI CISM OF THE IMPUGNED ORDER BY THE LD. C.I.T.(A) IS JUSTIFIED. 9. IN OUR CONSIDERED VIEW RIGHT COURSE NOW WOULD BE TO SET ASIDE THE ORDERS OF LD. C.I.T.(A) ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION THAT HE WOULD GIVE AN OPPORTUNITY TO THE ASSESSEE TO SUBMIT THE COMPLETE IDENTIFICATION AND CONF IRMATION OF THE PARTIES WHOSE BALANCES ARE OUTSTANDING AT THE END O F THE YEAR AND WHICH COMPRISED IN THE ADDITION PROPOSED BY THE A.O. AN D DELETED BY LD. C.I.T.(A). WE DIRECT ACCORDINGLY AND ALLOW THE AP PEAL OF THE DEPARTMENT FOR STATISTICAL PURPOSES. AS A RESULT APPEAL FILED BY THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSES WHEREAS C.O. OF ASSESSEE IS DISMISSED AS NOT PRESSED.. ORDER PRONOUNCED IN OPEN COURT ON 30/ 04 /2010. SD/- SD/- (T. K. SHARMA ) ( D.C. AGRAWAL) ACCOUNTANT MEMBER. JUDICIAL MEM BER. AHMEDABAD. DATED: 30/04 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. . ITA 3180 & CO 338-04 6 ITA 3180 & CO 338-04 7